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Rakuten Travel in China - Flourishing as a small fish in a pond full of big ones

Rakuten Travel in China - Flourishing as a small fish in a pond full of big ones (Forimmediaterelease.net) Online travel distribution in China currently portrays an intriguing scenario.

If one were to analyze the basic conundrum of being in the e-commerce market, i.e. checking upon whether the market is ready for a pure online travel model, then looking at the couple of big fishes in the online travel distribution pond, the answer may be seemingly no.

The issue of servicing the customer and, in turn, gaining a lead in terms of “mindshare,” as well as the “market share” seems to be the main mantra. And for this, the biggest player in Ctrip.com continues to lay emphasis on personal touch as it continues to expand its call center operations for its transactions or selling strategy - a strategy clearly reflected in Ctrip possessing, the largest call center in the Asian travel industry.

Ctrip has successfully integrated high technology with traditional travel industry services and products, allowing it to provide comprehensive services. Overall, the company possesses over half of China’s online travel market share.

While major players such as Ctrip and eLong continue to invest, a relatively small fish like Rakuten Travel, too, is making steady progress.

Its current status definitely sounds more interesting when one is reminded of two facts:

1. Rakuten Travel is almost purely an Internet-only booking player; and
2. Even though it had sold its 20.3% stake in Ctrip.com International last year, this strategic alliance did give Rakuten a valuable insight into the market.

Clarifying his firm’s stand in China, Rakuten Travel’s senior executive officer Hideaki Yokomizo said, “First of all, although Rakuten Travel and Tabimado (China) are almost purely Internet-only booking players, we have small call center operations both in Japan and China to support our customers, including telephone bookings. They are still in the early experimental stage; however, if it is proved that the call center is a cost-effective channel to expand our user base, we would move to the next step.”

At the same time, Yokomizo signaled that the call center may be an effective channel; however, it would not be the only channel even in China.

“For instance, in Japan, the browser phone is a sizable marketing and booking channel for Rakuten Travel, representing more than 10% of bookings. I believe that the browser phone will become a high potential channel in China in the near future, in particular, in conjunction with its capability to switch from phone to call centers easily.”

Considering that Rakuten has vital experience in this category, such comments do carry weightage. And this can not be ignored by relatively bigger players in China.

Rakuten Travel is a 100% subsidiary of Rakuten and it operates Japan’s largest online hotel reservation website with over 1.8 million room nights booked per month. Having access to more than 20,000 domestic and 15,000 international hotels, Rakuten Travel provides both leisure and business travelers a variety of accommodation choices. Plus, Rakuten Travel and All Nippon Airways (ANA) formed a joint venture in August 2006 to promote and sell dynamic packages, which will allow customers to combine domestic flights with hotel accommodations.

In China, Tabimado (en.tabimado.net) in Shanghai is a subsidiary of Rakuten Travel. It is an online hotel booking site, offering users to find and book hotels in China and Japan.

“Tabimado has contracts with hotels in China for us. In addition to our Japan to China hotel bookings, Tabimado sells its hotel inventory on its Chinese web sites, which is our China domestic business at the present,” commented Yokomizo.

The industry is keen to know about several areas of Rakuten Travel’s plans post its decision to sell its stake in Ctrip.com last year. For instance, whether the Japanese company is following a pure commission-based business model or is it also charging service fees.

Yokomizo did respond to some extent.

“As for our business development in China, it is too early to lay out a detailed marketing strategy/plan against the market leaders because we are just a small-size market follower in China at the moment. We first have to accumulate our experiences and skills and, in the process, we may partner with somebody in the market to accelerate the speed. For the time being, we will be able to contribute to the China travel industry more as an inbound agent bringing more Japanese travelers to Chine online than anybody else.

“Also, we are interested in the outbound booking from China to Japan. Although it may take a little while to solve the visa restriction issue for Chinese FITs to come to Japan, there will be a huge market potential in the market in the near future. And as the number one online agent to book Japanese hotels, we are well positioned to pursue the opportunity.”

With respect to being a strong pure online travel firm and the concerns pertaining to the usage of a credit card in China, Yokomizo said, “For the credit card payment, most of our bookings to Chinese hotels, both from Rakuten Travel's site and Tabimado's site, are done with the customer's direct payment to hotels. They pay upon check out. In this way, customers don't need to worry about the online security issue.”

From operations’s angle, other than local partner, IT and HR, there is also a need for a strong marketing presence.

Considering China is such a big country and with competition coming from established players, be it in online direct or indirect distribution, it is getting harder to make every penny count for customer acquisition.

Yokomizo admits this.

“Major challenges for us in China lie in the area of marketing, as we don't have, in China, a comparable large member base as we have in Japan.”

Mr. Hideaki Yokomizo will speak during the upcoming China Travel Distribution & Technology Summit to be hosted by Traveldaily. This event will take place on November 20-21 at InterContinental Hotel, Shanghai. For more information about this event, please visit http://summit.traveldaily.cn/en/index_en.asp .

Miracle Gum
Email: mgum@traveldaily.cn

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